Economics_Ch08 - 08(186-221 EMC Chap 08 5:27 PM Page 186...

Why It MattersSometimes you can negotiate the price youpay for a good. You are about to buy a car,for example. The sticker price is $25,000.You offer the car dealer $23,000. He comes backwith $24,500. You say $24,200 and the dealer acceptsyour offer.Sometimes you can’t negotiate the price you pay.You want to buy a shirt at a store in the mall. The priceis $30. You don’t say to the clothing salesperson, “I’llpay $25 for the shirt.” Instead,you pay $30.The lesson here is that notall goods are sold in the iden-tical type of market. In somemarkets, you negotiate price;in others, you don’t. Somemarkets are competitive; oth-ers are not. Knowledge of thematerial in this chapter willhelp you better understandwhy markets function in dif-ferent ways.186This farmer operates in amarket that economistscall perfectly competitive,which means that he is aprice taker. You will learnabout four different kindsof markets in this chapter.

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The following events occurred one day in July.9:22 A.M.Barry walks around the car lot looking at newcars. A car salesperson approaches him and asks if he can be ofany help. “I’m just looking around,” Barry says. “Did you have anyspecific model in mind?” the car salesperson asks. “Not really,”Barry says. The car salesperson walks and talks with Barry as helooks at the different cars on the lot. At one point, the car sales-person nonchalantly asks Barry what he does for a living.• Why did the car salesperson ask Barry what he does fora living?10:04 A.M.Melissa loves to read. She is currentlyin her local bookstore looking at the newest fiction. Melissareads the first few pages of a book by one of her favoriteauthors. She then closes the book and checks the price—$29.99. She wonders whether she should buy it. On theone hand, she really wants the book. On the other hand,it’s expensive and she knows that she could wait untilthe book comes out in paperback. It would be muchmore affordable then.• Why do book publishers publish the exact samebook in hardcover and in paperback, but comeout with the hardcover edition months beforethe paperback edition?7:34 P.M.Ethan is at Petco Park in SanDiego watching the San Diego Padres play theMilwaukee Brewers. He is thinking about going tothe concession stand and buying a hamburger,some peanuts, and a soft drink. The price of thehamburger is $6.50, a bag of peanuts is $5.00, anda soft drink is $3.75. The total price for the threeitems is $15.25. “That is a lot of money,” Ethanthinks to himself. “I don’t know why food is soexpensive at a baseball game.”• Why is food so expensive at a baseball park?9:59 P.M.George is getting ready to take hismedicine. He heard a news report on television ear-lier this evening saying that the company that pro-duces his medicine actually sells the medicine formuch less in foreign countries than it does in theUnited States. He pays $95 for a month’s supply, butunderstands that if he lived in India he could buy thesame medicine for the equivalent of $30.

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